Who says people are just a pair of hands that cost a certain number of bucks per hour? There's a reason why the lean world considers people to be an asset, and why we often rant about companies that forget about the value of people's creativity, knowledge, experience, and ideas.
Stanford Hospital understands that value, to the tune of $14 million in savings so far. Just by asking their employees.
Stanford Hospital & Clinics administrators didn’t wait for proposals on how to remove six cents from every non-labor operating cost dollar. They just did it – over $14 million – and left the particulars of how to save that amount to be determined. Less than a year later, after a brick-by-brick evaluation of 20,000 different items bought from 6,000 vendors and dozens of standard operating procedures, the Hospital’s expense ledgers have exceeded that daunting and ambitious target.
Not too shabby. They are looking directly at value.
[Director of Materials Management Rex] Fieck is talking about a change to an evidence-based management system – an approach that begins by challenging the status quo and ends with fact-driven decisions. The Hospital’s protocols are now based on a hybrid methodology Fieck jokingly says he stole from proven working solutions elsewhere. Fieck’s hybrid has already attracted inquiries from two major medical facilities on the East Coast and he has been asked to present the Hospital’s strategies at a meeting this summer of a major industry association.
“This is not a one-time project,” said Jerry Maki, Vice President for Clinical Services and head of the Value Analysis Steering Committee. “Our value analysis approach is the new way the Hospital will continue to secure appropriate products and services at the best price. Involvement of end-users and physician leaders – especially the department chairs – has been a key to our success.”
But reaching out to the overall employee base is the real key.
What Maki is describing is complete outreach – structured around departmental coordinators and more than 100 people dubbed “champions” who agree to take on particular projects. Through them and widespread internal publicity, all employees are being asked for ideas – and hundreds have come back for consideration, including one that suggested the Hospital stop buying 11 ounce cans of shaving cream for patient use and instead buy 1.5 ounce cans. Patients rarely finished the large cans. That thoughtfully-observed phenomenon, a tiny detail that adds up in a hospital that treats thousands of patients each year, is something that wouldn’t have been noticed by a manager.
A couple other examples?
People working at the Hospital’s Hoover Pavilion saw that the trash dumpsters there weren’t full when emptied three times a week. The Hospital reduced the frequency to twice a week and brought in smaller dumpsters. Fewer pick-ups and always-full dumpsters meant a cost saving of $87,000. Another small item multiplied large for savings: One person in each Hospital department has been assigned the job of checking for unused phone lines and pagers. So far, enough of those have been found to add up to a savings of over $100,000.
$14 million bucks, quick and simple just by asking. Manufacturers can do the same, and I it's a whole lot easier than setting up an overseas factory, investing in increased in-transit inventory, firing people and then rehiring and retraining new ones, and managing a more complex supply chain.